Year: 2014

Celebrating Heroes & Decades

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Stocks to Study (5/23/2014)

On The Shoulders Of Giants

This past weekend, we (Ken Kavula, Hugh McManus and Mark Robertson) spent some time with over 200 long-term investors in Chicago at the 63rd Annual Convention for the National Association of Investors (NAIC). If you’ve been around here for a while, you know that we often pay tribute to the likes of Messrs. Nicholson, Graham, Babson, Schloss, O’Hara, Janke, Seger and place/phenomenon called Beardstown here on these pages. We’ll do that again here.

But first, a quick reminder about the screening results at the top of the page. This weekly screen was inspired by Irina Clements. In fact, we call it our Irina screen. Every week we present the companies in the current update batch. We do fundamental updates on 1/13th of the companies at Manifest Investing every week using the same cycle as one of our trusted resources, the Value Line Investment Survey. Warren and Peter (we’re on a first name basis with them) both regard Value Line as a veritable and trusted resource. We do too.

  • Irina asked us to collect the top ranked study candidates … and allow us to compare the opinions of Value Line, Morningstar (another formidable and trusted resource) and Standard & Poor’s side-by-side. So we do that. We list our aggregate results next to the three of them. Keep in mind that every company report and equity analysis is as if we put a whole bunch of rhinos in a padded room, including the analysts who collectively form the analyst consensus estimates, and locked the door. They continuously are completing stock selection guide-centered stock studies and continuously generating the results as prices change (daily) and fundamentals (growth, profitability and projected P/E ratios) blow in the wind. We feed them occasionally because we know better than to frustrate or disappoint a Wall Street rhino.
  • The column on the left provides the ranking within the MANIFEST 40, our listing and tracking portfolio of the forty most widely-followed companies by Manifest Investing subscribers. This week, Intuitive Surgical (#37) and ResMed (#29) are among our community favorites. Teaser: During the current refreshing of the website, Kurt Kowitz will make this listing continuously available on the home page.
  • It may not seem like there’s any order or sequence — but there is. We combine the return forecast (projected annual return) with quality to come up with MANIFEST Rank. The companies on this list are ranked, top to bottom, using this combination characteristic.
  • The Value Line entry is the Value Line low total return forecast (VLLTR) for the companies. We believe — based on extensive research — that the VLLTR is a great second opinion and this figure should resemble the results of a considered stock study. (Note: The reason this figure may be different from the one on the company page is that we correct for the change in price and time horizon.)
  • The figures for Morningstar and S&P are based on their current fair value estimates. A low price (but probably not too low) price-to-fair value ratio suggests potential attractiveness from a return perspective.

There’s often a divergence of opinion from stock-to-stock and this week is no exception. Take a look at those ranked high by one agency versus the outlook from the others. This week, there’s a HUGE difference in perspective between Morningstar and S&P on Intuitive Surgical (ISRG).

73 Years of Heroes In The Making

It was every bit a phenomenon. From the cornfields of Illinois came a group of formidable investors who became known as the Beardstown Ladies. Formed in the aftermath of an investing small group first championed by the Business and Professional Women Association, Betty Sinnock and her colleagues transcended brokers who wouldn’t return an investment-related phone call from a WOMAN. Fast forward nearly 30 years and we can literally point to thousands of clubs and likely millions of investors who have been inspired to discover long-term investing. They were nudged by the likes of Doris Edwards (a persistent school teacher who gives me another book to read nearly every time I see her) and Maxine Edwards and now, a new generation of Beardstown.

Betty Sinnock accepted the Nicholson lifetime achievement award on behalf of Beardstown and the legions they’ve inspired over the decades. Promises kept. Indeed.

For more, here’s my report, Thanksgiving 2010 – Of Heroes & Harvests from a fairly recent trip to attend one of their club meetings — which are still often open to the public. Did I mention they have a section in a museum dedicated to their exploits and adventures?

Speaking of Beardstown, it’s one of the communities on Route 66. Last year, we took a spin down Route 66 stopping at places like Springfield (IL), St. Louis and Oklahoma City. One of the beaming faces at the end of the road in Oklahoma City, home of the Heart of Oklahoma chapter for NAIC was Irene Jondahl. Irene has been serving investors, building programs, assisting her colleagues and inspiring the seekers in their quest to discover successful long-term investing. Irene was honored with one of the awards for excellence in volunteerism. Irene is a blessing and a gift to all of us.

A few miles to the east in Cincinnati, there’s a team of volunteers in southern Ohio nestled in a hotbed of interest (and success) in building programs and PORTFOLIOS. It’s a machine. And reliable machines are often held together by the best fasteners, glue and duct tape. In this case, the Oki-Tri State has benefited from a lineage of leaders, and Linda Miller has been there nudging them along for over 25 years. Linda Miller accepted this year’s lifetime achievement award for excellence in volunteer leadership. The award is named for Ken “Mr. NAIC” Janke. I’m sure Ken is smiling about Linda’s exploits and achievements.

Last but far from least, we come to Ralph Seger. Ralph passed away during May 2014 and will always be remembered for his contributions to Better Investing, decades of stock selection and for the Repair Shop in the publication for years. His friends knew him as Captain Blunt. Because he was. He was a grumpy old man — probably since the age of 10. But with a heart of gold. When I joined the NAIC team back in the 1990s, Ralph welcomed me with open arms and helped me learn long-term investing up, close and personal. We shared literally hundreds of breakfasts, lunches and dinners. I will treasure them all.

It had been a couple of years since we last had lunch. I regret that. But I don’t regret the group dinner we attended at his retirement residence with his friends the Dankos and Sobols and our spouses.

When I learned of his passing, I did a [Search] for “Seger” on Manifest Investing. Ralph made a solitary post on our Forum back in July 2008. You can check out the sage and timely and timeless comment that he made here. Bottom line? Ralph was duly concerned — with a duly amount of grumpy wisdom about conditions in the banking industry. We can now look back and appreciate that within a few months, he nailed it. Ralph was featured in a Better Investing cover story, highlighting his frequent sage advice … and a lifetime of generosity to a community of long-term investors. Thanks, Ralph — we couldn’t be doing this now and going forward — without you.

Companies of Interest: Value Line

Materially Stronger: Winnebago (WGO), Tata Motors (TTM), Nuvasive (NUVA)

Materially Weaker: Geospace Tech (GEOS), Mindray Medical (MR), Volcano (VOLC), Invacare (IVC), Mettler-Toledo (MTD)

Market Barometer

The average Value Line low total return forecast is now 4.2%, up from 4.1% last week.

NAIC National Convention … Gone Shopping

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As the Better Investing long-term investing community celebrates its 63rd annual convention, here are some shopping ideas for stock studies.

High Quality & Return Forecast Screening Results

The following high-quality stocks have outsized return forecasts as featured on the Stocks page today at www.manifestinvesting.com.

Schaumburg sweet 16

Mucho Momentum, Persistence

As featured in our cover story for May (2014), this screening for non-core stocks was inspired by our repeat group champion in our annual stockpicking contest, The Broad Assets Investment Club of St. Louis.

Their selection of Lannett (LCI) tripled in 2012 and tripled AGAIN in 2013.

This listing attempts to identify companies with breakout earnings (early stage in their life cycle) with outsized earnings forecasts for 2014 and 2015.

Ivory Screen

These are the top percentile stocks based on a combination ranking of return forecast (PAR) and quality — and not limited to median return forecast (MIPAR) plus ten percentage points.

Ivory screen 20140515

Invest … Reading Is Fundamental

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“Investment in knowledge pays the best interest.” — Abraham Lincoln

This weekly message was first posted during November 2012, rekindled as a reminder that “Reading Is Fundamental.”

Reading is Fundamental

This Thanksgiving season, I was intrigued by a few conversations that covered the complete spectrum of the investing experience.

One discussion revolved around getting started. The individual happens to be stationed in Afghanistan with some time on his hands and is wrestling with where to start. I believe I convinced him that he was already ahead of the challenge. Why? Because he’d already begun imitating a sponge — absorbing everything that he could get his hands/eyes on. Read. Rinse. Repeat.

I still believe http://www.fool.com is a valuable resource for getting started and referred him to their broker smorgasbord and commentary on how to choose one.

The second discussion involved someone very close to me who is now actively funding a 403(b) and is giddy about the potential. We look forward to watching the account balance grow in much the same way that Tin Cup (our retirement plan model portfolio) continues to entertain us.

The third is actually a blend of a couple of separate conversations. One long-time subscriber called me to let me know that she’d no longer be subscribing. She’s 80 years old, for one thing. But she wished us well … a joyous holiday season … and then gave us an early Christmas present. “God bless you and your family and all of the Manifest Investing staff and community. It’s not that I’m not investing anymore — but I have reached ‘critical mass’ and I really want to thank you. I have a collection of high-quality stocks at Fidelity and Ameritrade … but I’ve reached the point where you’ve taught me how to watch them — and even more importantly, because of what I’ve learned, I have no trouble sleeping at night. In fact, I’ve slept well for a long time. Thank you.”

No. Thank you.

We’re humbled and grateful.

My wife and I and my parents went to see Lincoln this weekend. (1) Daniel Day-Lewis clearly knocks it out of the park and will be nominated for an Oscar, and is a likely winner. (2) If you’re going to see the movie, I’d recommend googling or spending a few moments with Wikipedia and the setting, characters and situation surrounding the passage of the 13th amendment. Tommy Lee Jones as Thaddeus Stevens is also worth the price of admission and a true courageous pioneer. (3) If you believe that bipartisan rancor and disagreement is something new on Capitol Hill, you’re wrong. Go see the movie.

Read. Rinse. Repeat.

Lincoln was voracious reader. There’s also a poignant scene in the movie where Lincoln urges simplicity while pondering a major decision. He shares “Occam’s Razor according to Euclid” with a youthful engineer and the telegraph operator, a powerful reminder that sometimes the best solutions are the glaringly simple.

And from a couple of young people getting started to a group of experienced long-term investing advocates who sleep pretty well at night, we’re grateful for the reminder.

And the optimism about what the future holds.

“I am a firm believer in the people. If given the truth, they can be depended on to meet any national crisis. The great point is to bring them the real facts — and some beer.” — Abraham Lincoln

Listen For The Cadence

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by Mark Robertson, Senior Contributing Editor, Better Investing

We Are NOT Afraid … To Be Millionaires!

“Youth! There is nothing like youth. The middle-aged are mortgaged to Life. Youth is the Lord of Life. Youth has a kingdom waiting for it. Every one is born a king, and most people die in exile.” — Oscar Wilde (1854-1900)

I thought I understood [investment clubs and long-term] investing.

After all, I’ve been doing this for nearly 10 years, have completed thousands of Stock Selection Guides (Stock Studies) and belong to a few investment clubs.

Kelvin Boston, in his remarks presented at Congress 2001, urged NAIC to realize that we have a responsibility to remind people that they need not be afraid to be millionaires. No fear. Thirty bright-eyed youngsters changed my outlook.

Captured by a Captive Audience

My audience ranged in age from 9 to 16. A group of seven boys and girls near the front row belong to the [Ujamaa] investment club. It was early on a Saturday morning.

Clearly, some of their friends were doing something else in places some of these kids wished they’d rather be. Others weren’t sure. “Who’s here because they want to be here?” A few arms bent at the elbow and hands were raised at half-mast. All of the investment club members raised their hands, perhaps a little higher than their cohorts. “OK. Who’s here because some adult has forced you to be here?” Another 10 hands go up. All the way up, with feeling. Beads of sweat formed on the back of my neck. I took a deep breath. I reminded myself that they can smell fear. It didn’t help.

“Wow. Who believes that no matter what I do or say that you’re going to be bored out of your skull and that you’ve already wasted a beautiful Saturday?” Three girls at the back, on the far right, nearly stood up.

I didn’t have a chance. Or did I? As the sweat found it’s way to my forehead, these three girls volunteered to become my teammates in a stock-picking game.

Of Movies, Camaros and Hawaii

I tried to remember what $20 a month was like when I was 9 years old. I had a paper route and did some odd jobs. In hindsight, it seems like a mountain of cash. One of the three grumbling girls reminded me that they spend $10 a week to go to a movie nearly every weekend — and that doesn’t cover the popcorn. A young man in the front row talked of how $20 a month now might grow to fund a car payment by the time he’s 16.

No fear. They are clearly NOT afraid.

The beads disappeared. I smiled. How do we know it’s possible? I shared the story of our incomparable chairman, Tom O’Hara, and $20 a month since 1948. We know it’s possible to achieve an annualized rate of return of 13.2% over 50 or 60 years. He’s done it. And he openly admits that other NAIC investors have done even better.

We divided into three stock-picking teams: the Good, the Bad and the Ugly. The three grumbling girls and I became the “Uglies.” A list of long-term companies from Fortune was provided to the teams. We discussed the companies and the youngsters tried to pick the long-term leaders.

My Teacher’s Guide had the 40-year rates of return. The accompanying chart illustrates the selections and the results of investing $20 a month at these rates of return.

The three grumbling girls picked all the stocks. Kudos to the Chicago South volunteers, these youngsters and their parents. Invest regularly. No fear. Listen for the cadence and march to the drumbeat of regular monthly investing.

This column originally appeared in Better Investing, July 2002. The theme is timeless and ever important …

All Right. All Right. All Right. AMEN!

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All Right, All Right, All Right … AMEN!

It was vintage Matthew McConaughey on Sunday night as he thanked God first for his Best Performance by An Actor in a Leading Role in his acceptance speech. (You could have heard a pin drop in the Hollywood audience.)

We have noted here previously that McConaughey nearly stole the show at Wolf of Wall Street despite a sparse few minutes at the very beginning of the movie. I will also confess that I was relieved that Leonardo, Jonah Hill, Meryl Streep and Julia Roberts remained in their seats all Sunday night. Maybe there’s more to thespian excellence than a spewing epidemic of the F-word.

I have not seen Dallas Buyer’s Club, recipient of several awards including Matthew’s but I probably will. Our own buyer’s club, this community of long-term investors, celebrated its own annual achievement awards this past weekend too. Manifest Investing and the Mid-Michigan chapter of NAIC teamed up to present this year’s red carpet, black tie, and latte-toting pajama party on Saturday morning. The Guest Knights (Herb Lemcool, Matt Spielman and Nick Stratigos) stole the show and the Audience toted home their first Golden Knight. It won’t be their last. The Wisdom of Crowds, Communities and Clubs is formidable, indeed. The awards for 2013:

  • Best Stock Selection (2013): Audience Choice, Ken Kavula, Cy Lynch for Priceline (PCLN)
  • Best Stock Selection (All-Time): Hugh McManus for Southwest Airlines (LUV)
  • Best Picture: Mark Robertson for Crossing Wall Street, highlighting the exploits of one Eddy Elfenbein
  • Best Accuracy (2013): Guest Knights Herb Lemcool and Matt Spielman
  • Best Accuracy (All-Time): Guest Knights Herb Lemcool, Matt Spielman & Nick Stratigos
  • Best Relative Return (2013): Ken Kavula
  • Best Relative Return (All-Time): Guest Knights Herb Lemcool, Matt Spielman & Nick Stratigos

A wonderful community steeped in collective (and shared) wisdom. Join us for the next Round Table on March 25.

All right. All right. All right. AMEN.

Companies of Interest

I have troubling drumming up much excitement for Issue 3 of the Value Line Investment Survey.

Maybe it’s the average Quality Rank of 57. Or the average EPS Stability of 55.

This week’s update batch is chock full of companies that get whipsawed by economic tides … and that makes them non-core in our investing universe. There are a few exceptions — like some of the specialty chemical companies, some of David L. Babson’s places to remain vigilant for price swoons. But for the most part, these companies can be treacherously volatile on the operating performance side. And that obviously translates to the stock prices. It’s generally a pretty good idea to double check against S&P fair values for the companies in this batch.

Materially Stronger: Interdigital (IDCC), Chesapeake Energy (CHK), Avery Dennison (AVY), Magellan Midstream (MMP), Zebra Technologies (ZBRA), Minerals Technology (MTX)

Materially Weaker: Encana (ECA), American Vanguard (AVD), Arch Coal (ACI), Boardwalk Pipeline (BWP), Alpha Natural Resources (ANR), Walter Energy (WLT)

Morningstar P/FV Nudges

The average price-to-fair value (P/FV) for the companies in this week’s update batch — according to Morningstar — is 99%.

S&P P/FV Nudges

The average price-to-fair value (P/FV) for the companies in this week’s update batch — according to S&P — is 115%. (!) The two research giants clearly have a difference of opinion this week.

Market Barometers

The average Value Line low total return forecast held steady at 3.4%, unchanged from last week.

Coming Attractions

This coming Saturday (March 8), we’ll spend some time with the retirement savings plan for government employees in a FREE webcast. We’ll take a look at the items on the menu — as we do for any qualified plan — take a look at how these components have performed, and some perspective on the outlook.

Time: 10:30 ET

Please feel free to share this opportunity with friends and family who have access to the Thrift Savings Plan. “Seating” is limited.

Registration: http://www.manifestinvesting.com/events/146-a-few-moments-with-thrift-savings-plan-march-8-2014

Round Table: Last Call!

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The February Round Table will get underway at 10:30 AM ET as our noble knights and damsels gather on the red carpet and mingle in the Green Room — sponsored by Caesarstone. The Pavilion management team would like to thank the overnight campers for not building a campfire on the red carpet and for maintaining order while celebrating with your “tailgate among the Golden Knights.”

Stocks likely to be discussed:

  • Apple (AAPL)
  • Caesarstone (CSTE)
  • Cognizant Technology (CTSH)
  • Fossil (FOSL)
  • Stericycle (SRCL)
  • Walgreen (WAG)

Come out for this FREE webcast and see how many Golden Knight statues that Ken Kavula and Hugh McManus abscond again this year.

Register via: http://www.manifestinvesting.com/events/143-round-table-march-1-2014

Round Table: Standing Room Only?

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Queue Dozing?

If this persists, we may have to go to assigned seating for Pavilion seats at next year’s Round Table Awards?

Some of these long-term investors have camped out to save their place in the queue.

“Dude, if you’re gonna go with Southwest Airlines cattle car seating programs, we’re going to have to resort to this. But no worries, we do this all the time at places like Duke or Michigan State University.”

Yes, it’s true that Southwest Airlines (LUV) is in the running for one of the most prestigious categories on Saturday morning.

“No. We’re not cold. It’s not like we’re doing this in Michigan … or New York … or Wisconsin. This is a cyber event, Silly! Besides, word on the street is that Ken Kavula has been red hot with his Round Table picks lately. We want to know how hot.”

True. But you’ve got the pajamas optional part right. Attendees are welcome to drop in with a cup of coffee and don their favorite casual attire. There is no truth to the rumor that Kathy Griffin or Joan Rivers will be doing fashion commentary tomorrow. I wouldn’t rule out a few pushups by Jack Palance, particularly if he’s nudged by Billy Crystal or Ellen Degeneres.

There’s still room and long-term investors are welcome and invited to join us. Yes, you may bring your sleeping bag.

Date: Saturday — March 1, 2014
Time: 11 AM ET (but the red carpet festivities will start at 10:30 AM ET)
Register: https://www.gotomeeting.com/register/475449410